Trend Continuation Patterns

The trend continuation pattern is the price model indicating the tendency
will continue after the current situation. While the model forming the price
moves in a narrow range. There are some trend continuation patterns. We will
discuss them and their signals.

The flag formation is a rectangle sloping downward or upward and having a
long pole. It is forming during a pause after a strong movement.

The flag consists of its body and pole. The pole height indicates a target
price after the end of the price formation. Usually the flag body includes 5
waves and price breaks out of the flag formation on the fifth wave.

The strength of the formation depends on an angle of the formation slope
against the main price movement – the more the flag body is directed
downwards the stronger continuation signal it is. It is better to trade
online after a breakout of the price formation.

The pennant formation looks very much like a flag with the triangular body
shape. The difference between the pennant and flag formations is that the
pennant has a small movement in a narrow range. On the chart it looks like a
small triangle on a long pole (candle).

The pennant also consists of a body and pole. A pole height indicates a
target price after breakout of the pennant formation. That means that after
breakout of formation the price will move the distance equal to the pole
height. The small pennant body also consists of 5 waves.

The other continuation pattern is a triangle formation. It is a dying price
movement during a pause on the market. On the chart it looks like a usual
triangle. Depending on its direction to the tendency it can give a strong or
weak continuation signal.

A symmetrical triangle at any moment of trend is always the strong
continuation formation. But if an ascending triangle appears on the bearish
trend and a descending triangle appears on the bullish trend they will be
weak continuation signals that need the confirmation. And the ascending
triangle on the bullish trend or the descending triangle on the bearish
trend will be the strong continuation signals. The triangle is formed on the
same principles as the mentioned formations and gives the same results:

• A classic triangle has 5 waves, but if it has more waves the movement can
be stronger after the breakout of the triangle formation;

• The price breaks out of formation at first half or three quarters of the
triangle, but if it breaks out at its last quarter the price movement will
be short and weak;

• After the formation breakout the price will cover the distance equal to
the widest part of the triangle formation.

When the triangle formation appears on the chart it is a good opportunity to
trade online after the breakout of this price model.

The tendency continuation patterns are not only good trading signals but
help to forecast a target price. If you know the possible distance of the
price movement you can surely trade during its period. We would also like to
highlight that the formation searching is not a science. The trader should
decide if he sees the formation or something like that. The more you work
with the technical analysis patterns the easier you find them and trade
successfully. But while you have no experience you should remember the rule:
if you see and understand the price chart formation clearly it will surely
work.